Analysts are predicting a surge in demand for uranium following the commitment made by 22 nations at the COP28 summit to triple nuclear capacity. Concurrently, China is intensifying efforts to secure uranium supplies to meet its expanding nuclear power needs.
Spot uranium prices have surged 56% this year, reaching US$86 per pound. Broker Bell Potter projects that the global nuclear capacity expansion could elevate annual uranium consumption from the current 161 million pounds to an estimated 500 million pounds.
The pledge from countries including the United States, Canada, the United Kingdom, Japan and France, is a significant contributor to this anticipated demand surge. Moreover, the geopolitical landscape is expected to intensify supply chain tensions, especially given Russia's role as a major uranium supplier.
China to quintuple uranium consumption
Guy Keller, a fund manager at Tribeca, emphasized the magnitude of this shift at COP28. He highlighted China's plans to quintuple its uranium consumption within 15 years. Keller drew parallels with China's past consumption patterns in other raw materials, such as steel and lithium, noting the potential for a similar trajectory in uranium.
China, which currently imports about two-thirds of its uranium needs, is actively constructing 24 new reactors, with plans for a total of 154, as per Bell Potter's reports. This construction is part of a broader global trend, with 60 new reactors being built worldwide.
Regan Burrows, an analyst at Bell Potter, warned of potential price spikes in uranium, similar to the peak of US$140 per pound in 2007. He noted that geopolitical risks and increasing demand could lead to significant supply chain disruptions. Burrows also pointed out the underutilization of production capacity by Kazatomprom (LON:KAPq), the world's largest uranium producer.
ASX-listed plays
In Australia, uranium mining policies vary by state, with Western Australia and Queensland imposing environmental restrictions, while South Australia permits it. The Olympic Dam deposit in South Australia, owned by BHP (ASX:BHP), is a significant global producer.
Bell Potter has identified several ASX-listed companies, including Boss Energy Ltd (ASX:BOE, OTCQX:BQSSF), Paladin Energy Ltd (ASX:ASX:PDN), Deep Yellow Ltd (ASX:DYL) and Alligator Energy Ltd (ASX:AGE, OTC:ALGEF), as speculative buys in the wake of the surging uranium market. Boss Energy and Paladin Energy have seen significant increases in their market values this year.